Proposal: New Private Money Supply Backed By Gold or Silver

The idea of a gold standard is nothing new, of course. However, the ability of the marketplace to offer a private, hard money alternative to the dollar, the euro, the pound, the yuan, and the yen is hamstrung by federal law here in the U.S. and by similar laws in other countries.

Efforts by the 50 states to create their own currencies must inevitably fail because of the combination of Constitutional limits (Art 1 Sec 10) which restrict states to only using gold and silver coins as money, combined with federal law (Title 18 Sec 486 and Title 31 Sec 5103) which prohibits any entity from issuing gold or silver coins other than the federal government.

Even private efforts to issue gold and silver coins have led to convictions of "counterfeiting" charges. See, e.g., the case of Bernard von Nothaus.

Federal law does permit the existence of alternative fiat currencies, which is what enables currencies like the Ithaca Hours to exist unhampered.

Ultimately, the world desperately needs a currency that is level and steady, and of course neither central bankers nor the politicians nor the Keynesian or Friedmanite economists have any interest in providing such a currency. Fiat currencies, even privately issued ones, suffer from the same defect.

As we continue to head for the inevitable monetary system crash that must come at some point, the need for a level-stead money supply becomes even greater. It needs to be in place and functioning before the crash comes, not afterward. Since we have no way of knowing whether we have many years or decades or just a few months before the crash occurs, we must take action sooner rather than later ... as soon as possible, in fact.

The only alternative I can see is a gold-backed or silver-backed currency that doesn't actually issue coins. The most obvious objection to such a system, of course, is that there is no way to know for sure that an authority that issued such a currency wouldn't inflate it later on. The closest thing we have to any protection in this regard is that (1) there would be a method for redemption in the precious metal backing the currency, and (2) competing currencies will have more incentive not to inflate, or at least Austrian theory tells us this is so. I believe it is likely true, but we must recognize that it is not a certainty.

Having said that, I think we should give serious consideration to issuing a currency as a community that is backed by precious metals. Such a currency needs to have the following characteristics:

The supply of the currency must be great enough to handle a global economy. While Austrian economics teaches us that the actual quantity of money doesn't really matter, the reality is that most people do care about there being "enough" currency. Therefore, I suggest that the pool of currency needs to number in the trillions of units.

The only way I can see to offer currency in those kinds of numbers is to make something like 10,000 units of currency equal to an ounce of gold or perhaps an ounce of silver.

Any for-profit issuing authority will always be suspected and doubted by the public. Therefore, such an organization needs to be not-for-profit. Of course, it won't be possible to get tax exempt status for such a venture, but it is certainly possible to register as a non-profit without gaining tax exempt status.

Such currency cannot be a "privacy" vehicle. There are too many regulations in place to prevent such a thing from happening. All transactions using such a currency would have to be considered public transactions, in the sense that the Feds could at any time demand access to the records. Such a currency would undoubtedly also fall under SEC purview, meaning that privacy would be virtually non-existent. However, bitcoins provide an example of a currency where all transactions are recorded, so this is not necessarily insurmountable. "Privacy" currencies tend to attract the worst elements in society, in the form of organized crime, drug smugglers, money launderers, etc. Thus, all of the regulations related to such activities would also have to be honored as well.

There must be a clearinghouse function, particularly for electronic money, which means that the non-profit issuer must also provide clearinghouse capabilities.

Such a currency must be redeemable in some way for the precious metal(s) backing that currency.

Such a currency must NOT be called a "dollar". This is a word that we can expect the U.S. government to defend to the death. I propose that we call this new currency the "paulie", in honor of Ron Paul.

The above list is by no means intended to be complete. It is merely a starting point for discussion.

The big advantage to establishing a non-profit currency-issuing organization is that it would be easier to get donations for such a venture rather than to try to raise capital for a for-profit venture.

The RP Revolution community has a long history of being able to organize itself and raise funding to support pro-liberty campaigns. I think that a pro-liberty campaign devoted to creating and supporting a hard-money-based currency on a non-profit basis could fit into this organizational model very well.

I'm posting this idea here in order to get reaction and further discussion, and to see if we can achieve some kind of consensus on moving forward with creating a non-profit organization for the purpose of issuing a hard currency.

what about all the people who don't own gold and silver? why should people who have it now (and likely bought it years ago) benefit more over others ? shouldn't everyone start on the same level playing field? i own some gold and silver so don't attack me.

Non-profits can make money - alot of money. My local Goodwill CEO and his wife make over $800k/yr. combined salary & benefits. That's criminal really - and they only return 15% of profits locally to support others - very suspect operation if you ask me.

Let's say you wanted to do this apart from the government. Where and how much gold do you get? Where do you store it? Where do you get the money to buy the gold and silver? How do you cover your expenses (aquiring and storing the gold, creating and distributing hard to couterfit certificates against the gold?

"I think we never get the candidate we exactly want unless you're the candidate." Rand Paul.

A credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...

...Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are the owners of the credit union and they elect their board of directors in a democratic one-person-one-vote system regardless of the amount of money invested in the credit union.

Let's move forward to the Constitution.. I am the new GOP. I stand with Rand.

It would be hard. If it got to big the feds would crush it like a small dog. see above.

There is no doubt that that is always a risk. I see it as a necessary risk, but it should not be underestimated. The hope is that the currency would gain acceptance fast enough that people would object in large numbers to such a crackdown, forcing the government to reconsider a crackdown. The Liberty Dollar had the opposite public view, as shown by the fact that the jury so easily found von Nothaus guilty. If the Liberty Dollar had achieved a high enough level of acceptance, I believe the verdict would have been different.

One thing is certain, though. If no action is taken, there will be no replacement currency that any of us will like once the collapse comes. Any replacement currency the government comes up with will be just another fiat currency. To my mind, this means that such risks must be taken.

The Liberty Dollar is also a special case, because of two factors: (1) Von Nothaus called it a "dollar", which set himself up for counterfeiting charges, and (2) he didn't pay attention to current federal law that prohibits the issuing of any gold or silver coins by any entity other than the U.S. government (which, of course, refuses to issue enough such coins to create a viable currency). Instead, he insisted on arguing for the purity of the idea that the government should have no say in the issuing of private currency. It's a nice idea, but in practice the government will always crack down on such a notion.

The currency I'm proposing has neither of these two limitations.

Originally Posted by cbc58

what about all the people who don't own gold and silver? why should people who have it now (and likely bought it years ago) benefit more over others ? shouldn't everyone start on the same level playing field? i own some gold and silver so don't attack me.

Non-profits can make money - alot of money. My local Goodwill CEO and his wife make over $800k/yr. combined salary & benefits. That's criminal really - and they only return 15% of profits locally to support others - very suspect operation if you ask me.

Yes, non-profits can make profits. In theory, they cannot be taken as profits; all profits have to be reinvested in the original purpose of the non-profit. But as you point out, there are no guidelines regarding salaries, which can get very large. Nevertheless, despite these weaknesses, the population still accept the viability of non-profits, and they still consider them to be operations "in the public interest" ... even Goodwill.

The key to success here is to run the non-profit the right way, to engender trust. No currency issuance system can ever be established that does not require some form of trust. The organization that honors that trust survives and thrives.

You don't have to own gold or silver in order to participate in such a currency. The currency gets issued based on precious metals acquired. Once acquired, and the currency is issued, anyone can trade with it, which is how it circulates into the hands of those who don't have gold or silver.

Also, anyone can buy gold or silver with dollars, then trade the metal for the new currency.

Originally Posted by Zippyjuan

Let's say you wanted to do this apart from the government. Where and how much gold do you get? Where do you store it? Where do you get the money to buy the gold and silver? How do you cover your expenses (aquiring and storing the gold, creating and distributing hard to couterfit certificates against the gold?

All are good, valid questions.

Precious metals would have to come from private holders who voluntarily decide to exchange it for the new currency. Ideally, you start with as much metal as can be acquired so that more new currency can be issued, but any amount can be used as a start. The more currency we're able to issue initially, the more currency can circulate faster and gain greater public acceptance faster.

One reason to start a non-profit is to raise funding to buy precious metals for this use. In this way, the non-profit would be the entity that decided to exchange precious metals for the new currency.

There are a number of private storage facilities. Swiss America has such facilities. They provide gold-denominated IRAs, so they already have such facilities available. I would think they'd be a good candidate for starters.

You're right about the need to cover expenses. Again, this is why I suggest a non-profit organization (which I will shorten to NPO for brevity's sake), so we can do fundraising in the short run. In the long run, expenses would have to be covered by clearinghouse functions, similar to the way Visa or Mastercard charge for processing credit card transactions.

You're also right that counterfeiting is an issue.

The easier question to address is electronic currency, because the clearinghouse could keep track of all electronic currency, essentially tracking all trades. Of course, this requires a great deal of computer security, so again there is need for a great deal of fundraising to make the project work.

There is also the question of whether the public will trust the NPO to keep honest track of transactions. Again, that kind of trust can only be earned over time by experience. I don't see any way to get around the trust factor right out of the gate. True trust is earned, not granted up-front.

The harder question is issuing paper currency. There is no doubt that we would need to bring in experts in such security to help with the issuing of paper currency. It's quite likely that paper currency would not be one of the first things we would issue, that the currency would start off life as solely an electronic currency.

peter schiff has the best plan which is already available to foreigners (we can't have nice things here). It's a debit card that you use to buy stuff whereever you are, but the money backing it is 100% reserve gold, not us dollars.

Tax is theft. War is murder. Conscription is slavery. Government is organized crime.

Bitcoin, in my opinion, has far too many drawbacks, most of which the promoters of bitcoin themselves acknowledge. Among its limitations:

1. Electronic only - in the long run, a currency needs to have a non-electronic equivalent in order to be viable. While electronic currency is certainly a vital piece of the puzzle, there must be a way to take transactions offline or the currency must eventually fail.

2. Transaction logs become humungous - Everyone has to keep track of gigantic amounts of logged information if and when the currency gains widespread acceptance. That's simply not practical. With 7 billion people conducting daily transactions, these logs will get so large that most people won't be able to track them all anyway. Worse, when bitcoins get retired because the transaction logs have gotten so big, the records of those logs will disappear. This makes it even easier to cheat with bitcoins (as bitcoin supporters have acknowledged).

3. Computer records are too easy to fake. Even bitcoins promoters acknowledge that this is an unavoidable risk where the bitcoin is concerned. Without a reliable authority to go to for verification, the average person has no way to protect himself or herself.

4. Bitcoins are not catching on. Despite the rhetoric of bitcoin supporters, there is no viable market for bitcoins. While the jury is still out on this point, the "early returns" don't look good. After more than five years of existence, only around 1,000 merchants accept them. That's an absurdly low number after five years.

5. The average person does not understand bitcoins. That's a big negative. It discourages people from trusting them.

6. The Electronic Freedom Foundation used to accept bitcoins as donations, but they stopped doing so because they have concerns about the bitcoin's viability as a currency.

7. Bitcoins have already caught on with criminal syndicates, money launderers, etc., and the Feds know it. It's only a matter of time before the Feds crack down on the bitcoin for that reason.

8. There is a hard limit of 21 million bitcoins. Hard limits are good, but 21 million is too small for a viable world-wide currency. There has been a proposal to divide bitcoins into 100 million "satoshis" each to expand the number of units of currency, but so far no one seems to have any real-world way to accomplish this. To the best of my knowledge, no satoshis have currently been issued anywhere. If at some point someone comes up with an actual satoshi, it means that the number of transactions everyone will have to track will increase 100 million times over. People would have to devote entire terabyte-size hard drives to storing and tracking the logs (see objection 2 above), and that doesn't even take into account the processing power and reliable database-drive software needed to sort through all that data whenever you want to conduct a transaction. These are not insignificant, low-cost or no-cost issues.

peter schiff has the best plan which is already available to foreigners (we can't have nice things here). It's a debit card that you use to buy stuff whereever you are, but the money backing it is 100% reserve gold, not us dollars.

As you point out, we need something here. The Schiff plan actually isn't much different from what I'm proposing. The difference is that what I'm proposing, we could actually use in the U.S.